A wave of mobile phone tariff hikes is sweeping through the East African region due to high inflation and a weakening local currency.

Operators cite inflation as the culprit

A wave of mobile phone tariff hikes is sweeping through the East African region due to high inflation and a weakening local currency.

After months of sustained low tariffs in Tanzania caused by a price war, operators have now hiked rates, citing rising inflation in East Africa's second largest economy after Kenya.

Operators have now united in cancelling all promotions and have revised tariffs upward in order to meet high operations costs. Inflation in Tanzania rose from 4.2 percent in October this year to 17 percent.

Competition, coupled with rising inflation and the high cost of doing business in the region, has steadily been digging into the operators' profit margins over the past year, raising fears that small operators would fail to expand their networks.

While low prices allowed operators to attract subscribers, they did little to grow the operators' revenue and tax contributions to governments. The competition also resulted in a decline in the quality of service by operators, resulting in congestion, more dropped calls and slow message delivery.

With the competition slowing down, the Competition and Consumer Protection Commission (CCPC), a commission protecting the interest of consumers in Zambia, has started pushing for the licensing of a fourth operator in order to reignite competition among operators.

"We are in talks with the government on the possibility of lifting a Statutory Instrument (bylaw) to pave way for the fourth mobile operator in Zambia to promote competition," CCPC executive director Chilufya Sampa told the media week.

The Zambian government has disallowed the issuance of a fourth mobile license to allow the current three mobile operators (MTN, Airtel and Zamtel) to adequately compete.

The Tanzania Communication Regulatory Authority (TCRA), the country's telecom sector regulator, said it only regulates interconnection rates and that it can not intervene in retail call prices, which are determined by market forces. Subscribers are now paying 1 shilling (about US$0.00978) per second from Sh0.25 per second.

Kenyan operators were the first to hike their tariffs two months ago, citing rising inflation in the region.

As Kenya is the largest telecom market in East Africa by investment and subscription, the hike in tariffs in Kenya is now having a ripple effect in the region with operators in other countries including Uganda expected to soon announce hikes.

As in many other African countries, the TCRA claims it does not regulate retail prices, as they are determined by market forces.

India's Bharti Airtel, which has operations in Kenya, Tanzania and Uganda, also has operations in Zambia and the Democratic Republic of Congo (DRC) in the Southern African region. It is expected that Airtel will spread the tariff hike also to the Southern African region.

However, operators are now hopping that the rate increase will help them make enough profit to expand their networks and invest in new technologies.

But as these countries are now facing increasing inflation and the shortage of foreign currency, the cost of calling is also going up.

Over the past year, the time that people in the region spent talking on the phone increased from an average 70 minutes per person per month to 100 minutes. But with the latest increase, the situation is expected to change as people especially in rural areas will not be able to afford long phone calls.